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Why the White House is backing away from Net neutrality

Comments from Obama administration officials at the CES Tech Policy Summit suggest fading enthusiasm for controversial FCC rules mandating Net neutrality. Why the change of heart, asks Stanford Law Fellow Larry Downes.

Larry Downes
Larry Downes is an author and project director at the Georgetown Center for Business and Public Policy. His new book, with Paul Nunes, is “Big Bang Disruption: Strategy in the Age of Devastating Innovation.” Previous books include the best-selling “Unleashing the Killer App: Digital Strategies for Market Dominance.”
Larry Downes
5 min read

Editors' note: This is a guest column. See Larry Downes' bio below.

LAS VEGAS--The Obama administration and its allies at the Federal Communications Commission are retreating from a militant version of Net neutrality regulations first outlined by FCC Chairman Julius Genachowski in September.

That's my reading of a number of recent developments, underscored by comments made by government speakers on a panel on the first day of a Tech Policy Summit at CES in Las Vegas.

Genachowski had initially described his vision for the future role of the FCC as a "smart cop on the beat preserving a free and open Internet." Communications companies understood that to mean aggressive and detailed enforcement of rules that would, among other things, prohibit ISPs from offering premium, or "fast lane," services.

Such services, which content providers could use to prioritize their interactions with customers over the parts of the Internet controlled by the ISPs, have yet to be offered. But the possibility that they would be ignited a firestorm in 2007 that has grown hotter since the election of President Obama, who proclaimed himself in favor of Net neutrality regulation during the 2008 campaign. Early in his administration, Obama appointed Genachowski, a longtime adviser, as the new head of the FCC.

Last fall, Genachowski proposed six Net neutrality rules and asked the full commission to approve them. The proposed rules could be adopted as early as spring.

But even as the commission concludes its collection of public comments next week, both the White House and the FCC appear to be dialing back their expectations.

A resignation
Signs of more modest Net neutrality regulations include resignation in late October of Susan Crawford, who took part in Thursday's panel discussion and who was previously a key adviser to the president on technology and communications. According to the conservative-leaning American Spectator, Crawford's version of Net neutrality was too radical for White House economic adviser Lawrence Summers, contributing to her early departure.

Crawford, who has returned to the faculty of the University of Michigan Law School, told the CES audience that the proposed rules are not radical and are, in fact, necessitated by consolidation in the broadband industry.

But she also acknowledged that U.S. communications law, which still operates under the assumption that voice, data, and television content are carried on separate networks, no longer makes sense. The likelihood of significant reform, however, given the "slow and clunky" legislative process, is slim. "It's time...and it's impossible," Crawford concluded.

On the same panel, White House deputy CTO Andrew McLaughlin reminded the audience that the FCC had yet to determine whether Net neutrality is needed to preserve the open Internet. He and Crawford both characterized the proposing of the rules as simply opening a dialogue on the subject to allow the FCC to collect data.

McLaughlin raised eyebrows last year when he equated network management practices of cable companies that limited the speeds of large file downloads to Chinese-style Internet censorship.

Today, McLaughlin seemed more measured in his comments. He did, however, dismiss concerns that strong Net neutrality rules would slow the deployment of higher-speed technologies. "There's little evidence," McLaughlin said, "that non-discrimination is going to disincentivize investment."

Panel member Neil Fried, who is minority counsel to the House Committee on Energy and Commerce, took objection to that claim and offered as evidence findings from within the administration itself. Fried pointed to recent filings by the Department of Commerce and the Department of Justice as part of the FCC's preparation of a national broadband plan. The DOJ's letter, for example, found no evidence of market failure in broadband today and warned the commission against premature regulation.

Political pressure
The administration is clearly backtracking. But why?

Part of the reason is some unexpected political pressure, including a letter signed by 72 congressional Democrats opposing the FCC's proposed rules soon after they were announced.

But the bigger explanation is the growing priority within the administration for nationwide, affordable broadband service. In the course of preparing the national broadband plan, mandated by the 2009 stimulus bill, universal high-speed access has taken on increased significance in the government's hopes for a rapid economic recovery. Beyond the current financial woes, Congress, the FCC and the White House all recognize the importance of improving the communications infrastructure to maintain U.S. competitiveness in technology innovation.

As Fried pointed out, however, nationwide broadband coverage would require an additional investment of $350 billion, much of it for fiber optic cabling. While the FCC was developing its plan and spending "too much time on Net neutrality," he said, the communications industry had already invested $60 billion toward that effort. By contrast, the stimulus bill allocated only $7 billion for broadband projects. Clearly, Fried noted, satisfying the goals of the national broadband plan will require significant private investment.

The major carriers are making the investments, and have every business reason to make more. But the Net neutrality rules, depending on how the FCC defines key terms, could hamstring their efforts to make their money back. Net neutrality is making Wall Street uncomfortable about financing broadband deployment. That in turn is making the White House nervous.

Net neutrality is turning out to be a noisy side show and a growing distraction from the real priority for both the White House and the FCC: getting the country wired for recovery.

Addendum, Monday at 10:40 a.m.: A Huffington Post article referring to this piece repeats a claim that I am a consultant to AT&T and argues that CNET should have disclosed that fact. I am not a consultant for AT&T. Some years ago, I did a speaking engagement for the company, during the period when I was booked for between 50 and 100 speaking engagements a year to talk about my earlier book, "Unleashing the Killer App: Digital Strategies for Market Dominance." An out-of-date bio of me on the Web site for the Bell-Mason Group lists AT&T among my "recent" speaking clients, from which The Huffington Post drew the conclusion that my views are not my own. AT&T was a client, but not recently, and it was never a client of the Bell-Mason Group.

Addendum, Tuesday at 11:15 a.m.: My bio on Bell-Mason Group's Web site is now up-to-date.